PARLIAMENTARY DEBATE
Student Loans Agreement - 18 July 2016 (Commons/Westminster Hall)

Given the temperature today, if Members wish to remove their jackets please feel free to do so.

I beg to move,

That this House has considered e-petition 131167 relating to changes to the student loans agreement.

It is a pleasure to serve under your chairmanship, Mr Pritchard, this afternoon. It may come as a surprise to some people that we are debating this issue in July 2016, as the decision was taken last autumn, but the reason is very simple: it took students some time to realise what decision the Government had made. Those of us who have been in the House for a while know that whenever the former Chancellor spoke, it was wise not just to listen to what he said, whether that was in the autumn statement or the Budget, but to look at the small print. And so it was last year: buried on page 126 of the Budget papers was the Government’s decision to freeze the repayment threshold for student loans at £21,000. Not unreasonably, it took students some time to realise what was happening. That decision was and is a real breach of faith on the Government’s part.

This is the second Parliament in succession in which students have been massively let down. Under the coalition, the Liberal Democrats promised to freeze, or in some cases abolish, tuition fees—as usual with the Liberal Democrats, it depended which part of the country people were in—and then the Government trebled them. This time, when the Government introduced the new student loans system, they promised that the threshold for making repayments would be updated from April 2017 in line with average earnings, but then they chose to freeze it until at least April 2021. The worst thing about that decision is that it is retrospective, so that students who took out a loan at the beginning of this process—let us remember that some of them were only 18 when they did so—have found the conditions of that loan changed, without any right of appeal or recourse to any other relief. People have said, quite rightly, that in a commercial organisation that would not be allowed, but it seems that the Government are not prepared to adhere to the standards that they impose on others.

Why have they done it? The late and fairly unlamented Department for Business, Innovation and Skills, which had some claim to being probably the most unskilled Department in Whitehall, said in 2015:

“We consulted on freezing the repayment threshold”.

So it did. The problem was that the responses were overwhelmingly against a freeze: 84% of respondents were against freezing the threshold and only 5% were in favour. When a Government conduct such a consultation, get a massive thumbs-down and still go ahead, we know that they are on very shaky ground, so we have to dig a little deeper to find out what was really going on. The answer is in another announcement from the Department:

“This increases the financial commitment of borrowers to repaying their loans.”

It added that it expected such a move to generate an extra

“£3.2 billion over the lifetime of the loans”.

There we have it. The Government were not getting enough money in, so they resorted to that rather underhand tactic to get more. There are two simple reasons why they are not getting enough money. First, they have failed to create enough highly skilled jobs in the economy, so many graduates are working in low-paid, low-skilled jobs, often in insecure unemployment, like many other people in the country. In fact, so committed are the Government to the notion of insecurity and low pay in employment that it was possible for them to have a candidate for the leadership of their own party, the right hon. Member for South Northamptonshire (Andrea Leadsom), who wanted to get rid of all restrictions on small firms—that was before she was given the revolver and the bottle of whisky. In 2012, she said:

“I envisage there being absolutely no regulation whatsoever—no minimum wage, no maternity or paternity rights, no unfair dismissal rights, no pension rights—for the smallest companies”.—[Official Report, 10 May 2012; Vol. 545, c. 209.]

It is not surprising that the Government have failed to create more skilled jobs. In fact, the Higher Education Statistics Agency pointed out last year that a third of graduates were working in low-skilled jobs six months after they graduated and that more than 16,700 graduates were unemployed. They worked as cleaners, office juniors and road sweepers. I am old enough to remember when graduates and students used to take those jobs in their holidays, or sometimes even in the summer after they had finished studying, while they looked for a permanent job and somewhere to live. We were told at the time that it was character-building for us, and it made us realise how lucky we were. Well, the luck has run out for many of today’s graduates. They are not doing those jobs for a few weeks; they are doing them for months, sometimes years, without reaching the level of wages that mean they can pay back their loans. No wonder the system is in chaos.

Secondly, the Government are failing to get this money in because the whole student loan system itself is in chaos. In 2013, the National Audit Office warned BIS that it was in danger of wasting hundreds of millions of pounds because it did not have enough information on the recipients of its loans. In fact, it had no employment information at all for 368,000 people, so it did not know whether they should be paying back or not. The NAO also said that

“BIS…consistently over-forecasts how much it expects to collect annually”.

Presumably, they were too frightened of the right hon. Member for Tatton (Mr Osborne) to tell him the truth.

At the time, the NAO estimated that a third of loans would not be paid back. The Library forecast a £3.2 billion shortfall, in this Parliament alone, between what the Government expected to collect and what they would actually collect. The former Business, Innovation and Skills Committee went further: in 2014, it suggested that almost half the loans would never be repaid. The Government’s own estimate was that 45% would not be repaid. That is perilously close to the 46.8% threshold at which the Government cease to get back as much as they are paying out.

What did the Government do in response? They did not think, “Well, perhaps the economic model we’re pursuing isn’t quite right.” They did not think to end the chaos in the Department. Instead, they sold off a bit of the student loan book—mostly old loans from the ’90s—and they used this back-door method of collecting more money, adding another flaw to an already flawed system.

Students are clocking up interest at such a rate that it is almost impossible for them to get a grip on what they owe. While they are university, interest is charged at the rate of the retail prices index plus 3%. One student recently posted online his statement from the Student Loans Company, which showed how much interest he was clocking up, sometimes at the rate of £180 each month. For someone earning under £21,000, interest clocks up at the rate of RPI. For someone earning more than that, it is on a sliding scale, so that when they earn £41,000 they are charged interest at the rate of RPI plus 3%.

Two things about that strike me as very interesting. First, the Government use the measure of RPI, when the rest of the time they tell us that the consumer prices index is the correct measure of inflation. They seem to hold two contradictory positions: when they are paying money out to their citizens—in the form of benefits, for example—they say that CPI is the correct measure of inflation, but when they are collecting money, they say that RPI is the correct measure. Holding two contradictory positions at the same time is what George Orwell called “doublethink”. The Government seem to believe in both.

Secondly, by freezing the earnings threshold at £21,000, the Government are ensuring not only that more people are on the wage level at which they start to pay back loans, but that they pay them back with a higher rate of interest. It is a double whammy. Such a piece of chicanery really should not be allowed to go unchallenged. It matters, because it is important that students have faith in the system. Changing that system destroys that faith, particularly among those from the poorest families or those who are the first in their family to go to university.

Let me tell the Minister what it is like to be the first person in a family to go to university—it was like this even under the old grant system. Such a person wants certainty. They calculate to the last penny what they are getting in and what they have to pay out. They want to know that when they leave university, they will get a decent job. That implied promise that if someone went to university, worked hard and got a good degree, they would get a decent job at the end, has now been abandoned.

My hon. Friend is absolutely right to choose to introduce the debate on this particular petition. I hope she has more success in getting answers from the Minister than I did in my Adjournment debate on 27 June. She is making a powerful case. According to the Government’s own figures, graduates on a salary between £21,000 and £30,000 will have to pay back £6,100, whereas those on a salary of £40,000 will pay only £400 extra. Those on an even higher salary pay even less. The system disproportionately affects people who are worse off, including women and people from ethnic minorities.

My hon. Friend is right. This system is flawed all the way through. Trying to fix it by making it more flawed is not going to work. Today’s students do not have the assurance, which we had in the past, that they will get a decent job. Many graduates are doing low-paid, low-skilled jobs that are perfectly useful but not commensurate with their qualifications. They often move from job to job, with nothing that could be described as a career. The doors of their chosen professions are frequently closed to them because they cannot afford to do the unpaid internships that are currently the way into many jobs.

I congratulate my hon. Friend on introducing this debate. I declare an interest: I have two sons, both of whom will have to pay loans back at the higher rate, and both of them have paid fees of more than £9,000 a year. My hon. Friend might also have mentioned graduates like my elder son. He has chosen to work abroad for two years, on a low wage, to get an interesting experience of the world. He is not fully aware of the implications for what he is going to have to pay or how the repayment rates are rolling up year after year.

I am grateful for that intervention. My hon. Friend is right. When students took out loans at the start of university—this was as true under the old system as it is under the new one—many were not really aware of the full implications: when they would have to start to pay them back, how interest accumulates and so on. We would be foolish to expect many of them to be aware of those things at the age of 18. I do not think I or many other Members would have been.

The problems faced by many young graduates are simple. They have little hope of getting into decent jobs and no hope of getting on the housing ladder. Many of them are stuck in rented accommodation, with rents rising every year, meaning that they cannot save for a deposit on a house. Recently released statistics show that this will be the first generation to earn less than the one before. The assumption we always made, certainly when I was growing up, was that each generation would do better than the one before, but that no longer holds good. That is a real betrayal of our young people. What the Government have done with student loans adds to that betrayal. They have failed to understand the implications for young people and to get a grip on the system.

As in so many other matters these days, the Government are making young people pay the price for their failure. The Minister should really think again. With a new Chancellor in place, there is a chance to revisit this matter and get the student loans system on a sensible and sustainable footing. I urge the Minister to take this chance, because what is happening at the moment is totally wrong.

I thank the hon. Member for Warrington North (Helen Jones) for moving the motion, although she could have been slightly more charitable towards the Liberal Democrats. This is a subject on which any Liberal Democrat speaks with some trepidation these days, but I voted against the coalition line on increasing student fees. [Hon. Members: “Hear, hear.”] Before that, in 2004, I voted against top-up fees, which Labour promised not to introduce—I do not think the hon. Lady did the same—so the record is mixed, but I can give some testimony on the awful torment the issue has created for the Liberal Democrats. I was party to several very difficult discussions within the party about how we should proceed. In the days of the coalition, those who wanted to increase fees used to put very heavy emphasis on the guarantee that the thresholds would move with inflation and that the £21,000 was a starter, rather than the final word. I suppose it could be argued that that was then and this is now. There are also arguments for keeping the situation as it stands and not making the changes that the current Conservative Government wish to make.

I shall rehearse some of the basic arguments. Every time I voted against either top-up fees or the coalition policy on tuition fees, I predicted, quite wrongly, that those changes would be dreadful for access to university. I have to accept that, empirically, that did not happen, but I was right about one thing: those changes added to student indebtedness every single time. If the Government make the changes they want to make, they will be adding to that indebtedness to the tune of at least £3,000. That is one argument for not making any changes, because young people are certainly indebted enough.

A second argument, which might seem slightly trivial, is that the Government held a consultation on the proposals. Consultations are supposed to be about finding out whether something is a good idea. There were, I think, 489 responses, and 42 organisations responded. Of those who responded, only 5% were in favour, with 84% against. The others were clearly somewhere in between or had mixed feelings. If we have a consultation, then quite clearly there is a purpose behind it. I think the purpose is to find out whether people think something is a good idea, and quite clearly they did not think this was a good idea. The Government then either ignore consultations or pay some heed to them. I think they should pay some heed to them.

There is a second, possibly stronger argument for the Government’s point of view—this refers back to the trauma my party went through over tuition fees. A lot of the debate at that time was not about whether it was a good political thing to do, because we could see the inherent dangers in it—in fact, people underestimated them. Part of the argument, particularly in relation to the Department for Business, Innovation and Skills, was that the change was absolutely crucial in order to manage the nation’s finances, as part of the austerity programme, which was the emergency brake we needed to apply to an economy going downhill fast.

People argued that at the time, but if we look at the statistics and the impact of that particular fiscal change, we can see that it was not half as big or portentous, and the impact of not making it would not have been anything like what we were told at that time, either by the Treasury or by the Secretary of State at the time, Vince Cable. When I look back at that particular decision, I see one that produced very little gain for the public finances, but an awful lot of pain—political pain for my party in particular and, more importantly, pain for all the students who were affected by it.

That is a pretty solid argument. I am sure that the Minister, who is a literate and intelligent man, can work it all out for himself, but if he looks at the political impact of making the change versus the fiscal gain, I think he will see that it was basically not an objective worth pursuing, because part of the rationale for the Government doing so was not that they wished to be faithless towards students, but that the country’s circumstances demanded it.

Going on to the country’s circumstances, however, if it is the case that, as the former Chancellor told us several times, the country’s finances are on an upward trend and that we are in a more buoyant position—I think the former Prime Minister said the other day that the economy had been left in a very strong position—why do we need to do worse things now than we had to do in 2010? I just do not follow the logic of that argument, unless we wish to redistribute income in favour of one group rather than another, and that logic has not been spelled out. The argument is “needs must”, but if needs must, why did we agree to one thing in 2010 and then, when the economy is allegedly improving, do something worse later on? That is the second argument disposed of.

The third argument, which I think the hon. Member for Warrington North mentioned, is this business of, “It’s a retrospective change”. Of course, Martin Lewis and people like that are saying, “This is a form of mis-selling.” If a private enterprise had done this, we would regard it as mis-selling and we would all be lobbying for the Government to address the issue. Commercial lenders would simply not be allowed to behave like this.

The Government, and previous Governments, have made a slight case for retrospection. I am aware that, in Treasury circles, retrospective measures have been taken, particularly on tax avoidance and the like—whereby people who set up tax avoidance schemes have subsequently found that they have been outlawed—but on the grounds that the schemes were of such a nature that those involved might reasonably have expected that. The Treasury has taken the view that says: “It looked a rather devious scheme at the time and if it looked devious at the time, then you should have thought it was devious and tried avoiding it, and if you get clobbered later on, well so be it.”

What argument could legitimately be put to students? The only coherent argument that could be put is that they ought to be aware that Governments are intrinsically faithless, but that is not really an acceptable defence a Government could pursue for long. We have a big political problem in this country and it was underlined during the Brexit debate. We have a big political divide in the country and a big problem with establishing that there is genuine inter-generational fairness. As the hon. Lady said, we are looking at millennials ending up in worse financial circumstances over time than their parents and previous generations.

What the Government are doing—and a Universities Minister should be bothered about this—is teaching students a hard and very unwelcome lesson, which is: “Don’t trust Governments. Any contract with a Government isn’t worth the paper it’s written on.” That is an extremely negative message, which the new Prime Minister and the new Government certainly ought not to be too quick to promote it. They should genuinely and urgently reconsider what they are doing, because, as the hon. Lady said, it will not make a huge difference one way or another now, but it will make a big difference in the message that it sends out to future generations.

I call Paul Blomfield to speak.

Sorry, Mr Streeting. Next time—seniority.

Thank you very much, Mr Pritchard: a good choice, but I am sure my hon. Friend the Member for Ilford North (Wes Streeting) will top my contribution.

It is a pleasure to contribute to the debate with you in the Chair, Mr Pritchard. I congratulate my hon. Friend the Member for Warrington North (Helen Jones) on introducing it, in her customary way, so comprehensively and with such passion. I am also pleased to see that the Minister still in his place. I am looking forward to long debates with him in the weeks ahead on the Higher Education and Research Bill, starting tomorrow.

The Minister has drawn a bit of a short straw today, because he has to defend something that is, frankly, pretty indefensible. I am very grateful to all the people who signed the e-petition to ensure that we have this debate today—I think the second highest number were from my constituency. I am also grateful to all those who have written me to share with me the impact this change will have on them—not so much financially, but in the way they feel they have been treated by the Government.

I am sure that my hon. Friend will make a fantastic speech. Like him, I represent many thousands of students in my constituency and, again like him, I have received many emails about this subject. Does he agree with me and indeed with my constituents—Tamsin, Elizabeth, Tom and many more—that these plans are dangerous, unfair and frankly outrageous?

My hon. Friend is perhaps making all our speeches redundant: she has summed it up in a sentence. Nevertheless, I will continue.

My hon. Friend makes an important point. Let me cite one of my constituents who has written to me. Rachel Stamper is due to graduate soon from Sheffield Hallam University. She started her degree—a bachelor of arts in early childhood studies—back in 2013. She made careful calculations before she started. She looked at what the Government said—that she would have to pay back on the money she borrowed. Like everybody else, she was told that from April 2017 the £21,000 repayment threshold would start to rise annually with average earnings. She based her decision to go to university on that information, because she thought that she could trust the Government.

Rachel made the calculations about what she could afford on the basis of the trust that she put in the Government. Now, she expects to pay thousands more over the life of her loan, because, given her area of study, she will graduate with an incredibly socially useful degree, fulfilling a positive and useful role within our society, but she is not necessarily going to be a high earner. As Rachel said to me, this is about more than “just money”:

“A retrospective change will destroy any trust I, and future generations, have in the student finance system, and perhaps even more widely, in the political system as a whole.”

This proposal was part of a double whammy announced by the then Chancellor after the election last July. As Osbornomics seems to have been rejected by the new Prime Minister, perhaps we now have a little bit of wriggle room to examine some of its more toxic components. This change is clearly one of them, because the first part of that double whammy was the abolition of maintenance grants, which in many ways overshadowed the decision we are talking about today. Nevertheless, the change in the threshold is important because it will have a genuine impact on graduates.

Why are we here today? Why are the Government proposing this change? My hon. Friend the Member for Warrington North made the point very well. Going back to 2012, the year before the system came in, many of us argued that the proposed new system was not only unfair, but that it had not been properly thought through—there was a back-of-an-envelope calculation of what the cost would be. In particular, we talked about the cost of unrepayable debt—the so-called resource accounting and budgeting, or RAB, charge. I remember the Universities Minister at the time, for whom I had a high regard, arguing on the Floor of the House and in the Select Committee on Education, on the number of occasions we scrutinised him about it, that he was confident that the RAB charge would settle at around 28%. As the conversation went forward over the years, he talked about 30% and then the upper 30s. Then it was 40% and finally, in our last exchange in the Select Committee, he said that the Department for Business, Innovation and Skills was modelling it at more than 50%, at which point the new system was clearly costing us more than the old system, on top of being unfair.

Something had to give, and it was clear before the last general election that something was going to give. I asked Ministers on the Floor of the House for assurances that they would not make students pay for the Government’s own mistakes by changing the terms of the system. I was told, in this great language that people use before elections, that there were no plans to do so. Well, no sooner were the votes counted than the plans were rolled out.

I have no doubt that the hon. Gentleman would have studiously examined, as we all did, all the election manifestos at the time. He will be aware that there was no mention whatsoever of the change in the Conservative manifesto, yet it was imposed within a few months of the party coming to power.

The hon. Gentleman makes an important point, which goes back to the issue of trust that is at the heart of today’s debate. We pushed the Government on the matter in the previous Parliament and there was no indication that the change was going to happen. We looked at the manifesto, and there was no indication there either. As soon as the election was out of the way, it happened: graduates being forced to pay for the Government’s mistakes. As the hon. Member for Southport (John Pugh) said, there was a consultation on the change. People think, “A consultation—presumably that is because the Government want to listen,” which is not an unreasonable starting point. Some 84% of the respondents said, “This is a bad idea.” What is the Government’s response? “Great stuff. We’ll go ahead.”

We face a system in which not only are those who did not expect it being asked to pay more, but, as my hon. Friend the Member for Walsall South (Valerie Vaz) pointed out, those who will earn the least will be hit the hardest. The Government’s equality impact assessment said:

“In terms of lifetime earnings, our analysis shows the greatest financial impact will be concentrated on those with around median lifetime earnings (between £20,000 and £35,000)”.

The figures are clear—the Government’s own figures. A graduate earning between £21,000 and £36,000 will pay an extra £6,100. By contrast, those earning more than £40,000 will pay an extra £400 and those earning more than £50,000, an extra £200.

A recent Sutton Trust report shows that although the overall average extra repayment will be £2,800—on the trust’s numbers—the gender pay gap means that women graduates will be disproportionately affected. Black students will also be disproportionately affected. The Higher Education Statistics Agency destination of leavers data show that, although the variance in non-black graduates’ salaries is larger than that for black graduates, there is more of a bunching effect for the latter, between £20,000 and £30,000, which is the salary range that will be most affected by the proposed changes. All those discriminatory impacts conflict with the Government’s stated objectives of widening participation in higher education and of trying to get those who are not traditional participants engaged more fully. All that mess is because of the Government’s initial mistakes in introducing the 2010 system.

I represent more than 36,000 students, more than any other Member of Parliament. Thousands graduate from the two universities in my Sheffield constituency. Because of this measure, Sheffield graduates are being made to pay for the Government’s mistakes, with the terms of the deal being changed long after they signed up to it. If a second-hand car salesman tried, years later, to get a customer to pay more than the contracted deal, he would be referred to trading standards. With a bank, there would be action by the Financial Conduct Authority. Why should the Government be subject to different standards? This is fraudulent behaviour. It undermines trust in the Government and confidence in the student loan system. I urge the Minister to think again.

It is a pleasure to serve under your chairmanship, Mr Pritchard, and to follow my hon. Friend the Member for Sheffield Central (Paul Blomfield), who gave an excellent speech, save for the reference to used-car salesmen. I have to declare an interest: my dad is a used-car salesman and he would never find himself in front of trading standards in the way described. We have heard some excellent speeches, particularly from my hon. Friend the Member for Warrington North (Helen Jones) and from one of the Liberal Democrat Members, the hon. Member for Southport (John Pugh). He honoured his pledge, for which he deserves credit.

I also want to focus my speech on the issue of trust. I confess to having something of an axe to grind. I have been a consistent opponent of the tuition fees system introduced by the Labour Government in 1998, the system that was introduced by the Labour Government in the Higher Education Act 2004 and the coalition reforms in 2010 and 2011. It is true that, in all those cases, I did not think that the right direction—an equitable or sustainable direction—for the funding of higher education had been set out, but I do not want to rehearse those arguments. This afternoon, the debate is more about the promises that were made and the trust that students and their parents, teachers and advisers can have in the Government and in the system overall.

In 2011, I was asked by Martin Lewis—who I am delighted to see in the Public Gallery—the founder of moneysavingexpert.com and a trusted consumer champion—

Order. Forgive me but I have to do this. It is not appropriate, or allowed under the rules, to refer to people in the Public Gallery, however well meaning the reference. I feel uncomfortable saying that, but I have to obey the rules and I know that the hon. Gentleman would want me to highlight them.

I am grateful to you, Mr Pritchard. That shows that, even after a year in this place we new Members are still learning.

Martin Lewis was asked by the Minister at the time—now Lord Willetts—to lead an independent taskforce on student finance information. Martin asked me to work with him as his deputy in that endeavour—partly because I had recently finished my term as president of the National Union of Students—to reinforce the fact that, although we were opponents for different reasons and to varying degrees of the reforms that had been put through, we had a shared belief that whatever the merits of the coalition Government’s higher education funding reforms it would be an absolute catastrophe if students were deterred, or their parents or advisers dissuaded them, from going into higher education not because of the substance of the package but because of a misunderstanding of it. We were not going out there to sell the reforms on the basis of their politics or their merits; we were simply going out there to argue the facts and to ensure that people could take an informed view.

I do not regret taking that position, because it is crucial that people who are making decisions about their future, particularly those from disadvantaged backgrounds who sometimes do not have access to the information, advice and guidance that people from wealthier or privately educated backgrounds have, are able to make those decisions based on the facts. We toured schools and speaker events and produced a range of materials. We did our best to empower advisers to give young people making decisions about their future the tools they needed, and we did it in good faith. I have to ask the Minister: how on earth does he think it could be justifiable for people who have signed up to a higher education student finance package to see the terms and conditions changed, either during their course or after they have graduated? That is not only unfair; it entirely undermines confidence in the Government, as teachers, grandparents, parents and students are out there looking at the information and making decisions.

Last week, I was at Caterham High School in my constituency talking to sixth-formers, and among the questions I was asked were: will the student finance system change for me? Will the repayment conditions change? Will the level of grants or loans change? I am afraid to say that I had to give the honest answer, which is, “I don’t know and I can’t give you that guarantee because of the way in which the Government are behaving”.

For the integrity of the system and for people, particularly those from disadvantaged backgrounds, to be able to make informed choices, the Government have to provide certainty and assurance that the system will not change further down the track. Other Members have rightly pointed out that, if the Government were a private company, we would be absolutely appalled if they were behaving in this way.

The Government may argue that under the small print of legislation it is entirely possible and permissible for Ministers to change the terms and conditions for existing students and graduates, but if a company behaved in such a way, the Financial Conduct Authority would not just be looking at the small print of the terms and conditions; it would also be looking at the marketing material, the sales material and the pitch made by every higher education institution, by the Government, by third-party advisers and by the Independent Taskforce on Student Finance Information. If the FCA came in front of my Committee, it would find it hard to justify a ruling, on the basis of the information and the marketing material that have been distributed, that it was ethically right for a lender to behave in the way the Government are proposing to behave. On that basis, the Government have to think again.

As my hon. Friend the Member for Sheffield Central rightly argued, a change in Government and personnel provides an opportunity to look at the issue with a fresh pair of eyes. The Prime Minister would be congratulated by all parts of the House if she came forward and argued that trust and faith, not just in the student finance system, but in politics itself, were more important than any money saved through the initiative the Government propose. The Government could look to save money in the system through more equitable ways that would lead to higher-earning graduates paying more over the course of their careers than those on middle or lower incomes. I suspect that that is a debate for the passage of the Higher Education and Research Bill.

The Government need to think again on the merits of the arguments that were put forward. They also need to reflect that this issue is of interest not just to students, but to their parents, grandparents, teachers and advisers. Given the damage done under successive Governments to trust in politics—not only on other issues, but on this issue of student finance in particular—I urge the Minister to give this a serious rethink and come forward with alternative proposals that do not lead to Governments changing the terms and conditions for existing students and graduates. If he is not prepared to do that voluntarily, I suspect I will not be the only Member tabling amendments to the Higher Education and Research Bill, so that we can continue this debate and, I hope, gain support from all parts of the House for the Government to act in a different way.

It is a pleasure to serve under your chairmanship, Mr Pritchard. I thank my hon. Friend the Member for Warrington North (Helen Jones) for securing and leading the debate on this very important issue and for her work chairing the Petitions Committee. I also thank the 130,000 signatories who have highlighted to Parliament their dissatisfaction and concern about the changes to the student loan repayment structure. Many of those signatories come from areas that have Tory MPs. One could be forgiven for not realising that, given the attendance from Tory MPs in this debate, which I am pleased to note has recently increased by 200% from a grand total of none.

Since becoming an elected Member of this House, I have seen the Conservatives continually attacking workers’ rights and the healthcare system and freezing public sector wages. We have witnessed unequal cuts to welfare and local councils, as well as a substantial reduction in front-line police officers and firefighters, but no single group in society has been given as unfair a deal as our students. They have seen an unfair deal at every turn. There has been the loss of the education maintenance allowance, which gave people from the poorest backgrounds £30 a week. That might seem a small amount to some, but it gave 12,000 young people their only chance to go on to further education. Many of them went on to university. The coalition Government cut that allowance, and that affected my constituents in Heywood and Middleton. They found that they could no longer afford the bus fares to attend Hopwood Hall, a further education college in my constituency.

State sixth forms have lost a third of their funding, as it has not been ring-fenced from cuts. Mental health services have been overlooked and hugely underfunded. Youth support and advice services have been lost. There are also the changes to voter registration, the lowest rate of house building since the 1920s, the alteration of student nurses bursaries, which have been turned into loans, and the astronomical increase in tuition fees from £3,000 a year to £9,000 a year. In her role as Home Secretary, the new Prime Minster wrongly deported 48,000 international students, and that was before we voted for Brexit.

Students are clearly receiving the worst dealt hand of the lot. The retrospective changes to the student loan repayment system are unacceptable, unjust and underhand. As many Members and hon. Friends have pointed out, if the Government were a registered commercial company and made retrospective changes to their loan terms, the regulator would not permit the process. We are now the regulator in this House and we should not permit the process. We cannot and should not play politics with people’s education.

The average increase in loan repayments will be just under £2,000 across all graduates. As has been mentioned, those from the poorest 30% of households will repay an average of around £3,000 more under the new rules. Freezing the repayment threshold has a proportionately larger impact on repayments by graduates with lower lifetime earnings. All that equates to 2 million graduates who will end up paying £306 more each year by 2020-21 by comparison with 2016-17. The average student leaving university will have a debt of £44,000 before even acquiring his or her first job.

When the introduction of the tuition fees hike to £9,000 was announced in 2010, the former Prime Minster and the former Chancellor of the Exchequer said that students would only start paying the money back at a graduate’s salary, proclaiming that was “fairer” and “progressive” and “helped social mobility”. In 2015, the Department for Business, Innovation and Skills looked at the current proposal and concluded that it would have a disproportionate impact on women, disabled students and students from the most disadvantaged backgrounds. The National Union of Students calculated that students previously eligible for maintenance grants who took out their full loan entitlement on a three-year course would graduate with debts worth more than £50,000. That is not progressive; it is not fairer and it certainly does not help social mobility.

The change will not only affect students; it will also have a significant effect on the taxpayer. The Office for Budget Responsibility estimated that, in 2046, when the first set of graduates on £9,000-a-year fees can have their debts cancelled, £11.6 billion will be scrapped. That will increase to £19.9 billion only two years later. In total, 73% of graduates are now expected to never fully pay off their debt, by comparison with 32% under the old system. Figures from the Royal College of Nursing show that it would take 247 years to repay a NHS loan on a staff nurse’s salary. I know that life expectancy is increasing, but I had not realised that the Government expect it to be on that scale.

In their last two manifestos, the Government have said, “We should live within our means,” and, “We shouldn’t pass on levels of debt for future generations to pay,” yet we have seen the debt double to £1.7 trillion since 2010. We have now lost our triple A credit rating, all while burdening younger generations with £44,000-worth of debt before they even get on the job and housing ladder. That is unsustainable and unattainable.

It is now clear that it is the Conservatives who have been reckless and maxed out the nation’s credit card, and it is our children who will be footing the bill. I believe that an investment in knowledge pays the best interest. I hope that the Government will rethink this regressive policy, which is at the heart of all that is underhand, unscrupulous and unfair. If they do not, it will be seen as an act of betrayal for a generation. It is not just a financial and legal issue; most importantly, it is a moral issue.

I thank the Petitions Committee and my hon. Friend the Member for Warrington North (Helen Jones) for scheduling this important debate. It is a pleasure to serve under your chairmanship once again, Mr Pritchard. I am glad to have the opportunity to speak about an issue that will affect many young people in university cities such as my constituency of Cambridge, where more than 700 petitioned me on this issue.

As my hon. Friend the Member for Warrington North said, the issue is not new. In fact, I raised it at Prime Minister’s Question Time in December last year, which seems a lifetime ago. At the time—it is extraordinary—the right hon. Member for Witney (Mr Cameron) was otherwise engaged touring Europe and negotiating his deal; it seems such a long time ago. In his absence, the then Chancellor answered. I had asked:

“When the Chancellor tripled student tuition fees, he set the repayment threshold at £21,000. He has now frozen the threshold, and the Institute for Fiscal Studies tells us that many students will bear many extra thousands of pounds in repayments. Given that he has broken his promise, will he send students an apology or just the bill?”—[Official Report, 9 December 2015; Vol. 603, c. 989.]

Unsurprisingly, he did not apologise, and students, I fear, are now left with the bill. What he is left with is rather less clear, but he has obviously got more time on his hands.

Changing the threshold at which student loans are to be repaid, as other Members have pointed out, really does not do politics any good. As all of us here know, one of the major challenges facing us is to slowly rebuild, piece by piece, the trust that has been lost in politics. We need to repair the connection between voter and elected representative, and moving the goalposts really does not help. It is clear that current and prospective students are angry, and I cannot blame them. They are being pulled out of the European Union when the majority of them wanted to remain. They are now being denied opportunities and experiences across the continent that just a month ago seemed boundless. Back in 2010 they were misled and tuition fees tripled under the Liberal Democrats and Conservatives. In many university cities like mine, they are being locked out of the housing market, and in many cases locked out of the rental market, with the cost of living constantly rising. The Government have gambled their future away on an exceptionally bad hand. To top it all, young people are being shafted by the Government on student loan agreements. How can we expect them to put any trust in us when this is how they are treated?

As other Members have pointed out, the Government are keen to remind us that there was a consultation, and when 84% responses came back saying, “Don’t do it,” it was ignored. Of 489 responses, 410 were explicitly against keeping the threshold of £21,000 the same for all post-2012 borrowers until April 2021. As others have said, the Government—and local councils, too—lose all authority if they consult the public having already made up their mind what they are going to do. The consultation seems as if it was a charade. In fact, it was a sham, which is a shame, because the respondents’ points were worth listening to. Their main arguments, some of which have been rehearsed, were against freezing the repayment threshold for five years for all existing and new loans. They argued that the policy represents a retrospective change to borrowers’ terms and conditions which, as others have said, would not be allowed to commercial lenders, and that leads to a further loss of trust.

Such loss of trust occurs on a number of levels. The policy goes back on the original deal made between the Government and each student, saddling them with more debt than they signed up for and undermining the fundamental fairness that a contract should entail. It completely disregards the views of those consulting on the policy, including student unions and higher education providers—perhaps they are a part of the group of experts the world no longer believes in. Those most directly affected are the ones who know what the policy will do. It was snuck in through the back door. It was omitted from the now ex-Chancellor’s spending review speech, and it was introduced furtively and somewhat undemocratically through secondary legislation.

The effects are severe, as we have heard. The Department for Business, Innovation and Skills said in its post-consultation report:

“In 2020-21 borrowers will be paying £6 per week, or £306 in the year, more than they will be in 2016-17.”

The Institute for Fiscal Studies has found that freezing the repayment threshold has a proportionately larger impact on repayments by graduates with lower lifetime earnings. It also estimates that a five-year threshold freeze would increase average repayments by almost £4,000, and that it expects middle-income earners to be hardest hit by the threshold freeze. The Government’s own equality analysis agreed. It concluded that the largest increase in lifetime repayments in absolute terms is among middle earners, and the largest increase as a proportion of earnings is among lower earners. The analysis also concluded that the average increase in repayments would be greater for women than for men.

A constituent wrote to me:

“It breaks my heart to see my family saddled with huge debts that will certainly affect their life chances.”

It is imperative that we do not underestimate the impact that an unexpected loss of several thousand extra pounds could have on middle and lower earners struggling to get by. We must look at the changes in a wider context. They come alongside the scrapping of student grants and their replacement with loans, a policy change that the IFS estimates will most affect graduates from lower-income families who go on to become higher earners. Just as we have seen with the Government’s damaging pay to stay housing proposals, the policy effectively penalises social mobility and aspiration. It creates extra barriers for successful graduates from low-income backgrounds, but has little impact on students from the richest households.

I was fascinated to discover that the new Prime Minister said in 1997—we have all said things in the past—that she had a real concern that

“to abolish the maintenance grant and replace it with loans will, far from widening access, narrow it.”—[Official Report, 4 November 1997; Vol. 300, c. 155.]

I wonder whether she will, some years later, revisit her predecessor’s schemes.

Freezing the student repayment threshold also comes alongside changes to tuition fees expected in the Higher Education and Research Bill, which I am sure we will discuss in the days ahead. The Bill will allow some universities to charge tuition fees that rise in line with inflation, creating a greater hierarchy of education, with some simply costing more. As the University and College Union points out, further increasing the cost of higher education to the individual is hardly conducive to widening participation.

The UCU also identifies further potential retrospective changes: many students could begin their courses without knowing the full cost of their study, which could change if the institutional rating changes. All that comes at a time of great instability in the sector. The Universities Minister recently said:

“This Government have done more than any other to put the financing of higher education on to a secure and sustainable footing.”—[Official Report, 27 June 2016; Vol. 612, c. 125.]

Others may see it slightly differently, especially as that was said a few days after the EU referendum, the shockwaves of which are resonating around our universities and research sector. It may be one of the most destabilising events that our higher education sector has experienced in many, many years.

The Government’s original justification for implementing a repayment threshold freeze was that it was necessary to contribute towards debt reduction and to balance the books. As others have said, the rule book seems to have changed. The budget surplus target has been abandoned. Higher education policy has been carved away from one Department and bolted on to another. The Prime Minister said:

“When it comes to opportunity, we won’t entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.”

Hear, hear to that; let us hold her to that.

Change is afoot, so I hope the Minister can confirm that students will no longer be treated in such a shabby way, but will be treated better. We are already standing amid the broken pieces of the big society and the wreckage of BIS and our place in Europe. Please do not add to that wreckage. Do not break your promises to all those students who trusted you to keep them.

I shall call the Front-Bench spokesmen and women in a moment. We have a little time today. Typically, Front-Bench spokespersons speak for 10 minutes. However, we have a little extra time if required.

You obviously do not know me if you are telling me I have additional time, Mr Pritchard. It is always a pleasure to serve under your chairmanship and a pleasure to serve under one of the jackets-off brigade of Chairs. I thank you for that.

I am pleased to be able to contribute to this debate, although if this issue ever finds its way to a specific vote in the Chamber of the House of Commons, I will probably not be allowed to vote on it, thanks to the delights of English votes for English laws, which assumes that nobody in my constituency is affected by the changes or even cares about them. My email in-tray suggests that my constituents are affected and do care.

For me, there are two principal arguments against what the Government have done. First, and most obviously, it is the wrong thing to do. It discourages students, especially those who are less well off, those from ethnic minorities and those who are disabled—the very people who have lost out on university education opportunities in the past—from fulfilling their full academic and professional potential.

Secondly, it is wrong because of the way in which the Government did it. They used a Commons majority to force through changes within a few months of an election. I should correct hon. Members who said that the proposal was not mentioned in the manifesto; it was, but it was written in such a way—it talked about maintaining improvements and progress made in 2010—that anybody reading that brief mention would think that it was an undertaking to abide by the promise made in 2010. It certainly was not an undertaking to throw that promise out of the window. The way the Government did it was wrong. The fact that they held a consultation, then ignored the views of 84% of respondents means that the entire consultation was a complete and utter waste of money. We have to wonder whether it was carried out just to create a veneer of respectability.

Some people would advance a third argument about the legality of the whole thing. I am not going to get into that argument because I am not a lawyer. For me, this is not about whether it is legal or illegal. It is wrong—end of story. Even if it is ever proven to be completely within the law, it is still wrong; that is why it should be changed. It is wrong because it stands in the way of us moving towards the kind of society that I and all Opposition Members want to see. If we believe the new Prime Minister, it is the kind of society that she wants to see, too.

The Government’s equalities assessment, which is cited in the House of Commons Library briefing, and which some Members have referred to, states that the average increase in repayments is likely to be greater among women than among men. Although the findings about the impact on people with disabilities and those from ethnic minority groups are not clear, there is a high likelihood that, because of their income range, they will have to pay proportionately more. This is not a step towards creating a society in which women, people with disabilities and people from ethnic minorities are finally able to make up for the disadvantages that they have had to bear for far too many generations. The Government can hide behind a fig leaf, as they did in the analysis by saying that the impacts are small, very small or relatively small, but a backwards step is a backwards step, regardless of how small it is. The fact that the Government made the change in the full knowledge, from their own research, that it is a backward step has to make us wonder how committed they really are, whether under the previous or the new Prime Minister, to opening up access to university education for all.

I believe that it is not work per se but education that helps people to deal with poverty. We can see perfectly well that more people are working, yet more are in poverty. The reason why so many people are in poverty is that they are working in low-paid and insecure jobs. The way to deal with that in the longer term is to increase the standards of education and the opportunities for education that are available to each and every person. Education should be limited only by a person’s ability to learn and willingness to work, not by their ability to pay, their parents’ ability to pay or, in some cases, their children’s ability to pay—that is how long the loans are going to continue.

All this is in marked contrast with what is happening under the Scottish Government. I want to talk about that briefly, because it demonstrates that the changes are not being made of necessity; they are a choice. In Scotland, we have a deeply held belief that education is for everybody, and that it should be a way of reducing inequalities, rather than perpetuating or even increasing them. While the Tories, with some support—with the honourable exception of the hon. Member for Southport (John Pugh)—trebled tuition fees in England, the Scottish National party Government in Scotland continued to protect our 120,000-plus undergraduates from having to pay tuition fees. The Scottish Government continue to fund the education maintenance allowance scheme, which helps 132,000 young people from poorer families to continue their school and college education. The Conservative Government down here have abolished that scheme.

We do not see financial support to students as a giveaway. It is obscene that the Government talk about the notional £100,000 of additional earnings that graduates can expect to earn over their lifetime. If graduates earn that much more because they are graduates, they will pay it back through their income tax anyway. That is how high earners should be taxed. They should not be taxed additionally because they happened to have attended university. I have never ever met a nurse, a teacher or a social worker who enrolled as a student of those professions to get rich. I have never known a student nurse, a student teacher or a student social worker who could tell me on the day they matriculated or the day they graduated how much they expected to be paid over their lifetime. That is simply not what brings people into those vital and all-too-often undervalued professions. Let us stop saying that these changes are minor because they do not make much difference to people’s long-term, lifetime earnings. They are enough to deter people who are scared of the idea of leaving university with a student loan debt that is two or three times as much as their first annual pay packet is likely to be.

Members may not be aware that the Scottish Government continue to provide bursaries for nurses and midwives because we accept the need to train highly qualified nurses and midwives to run the health service in future. We continue to give non-repayable bursaries of £6,578 per year, with additional support if the student nurse or midwife has childcare responsibilities, for example. By comparison, the UK Government seem more interested in making sure every newly qualified nurse or doctor comes out of university with terrifying levels of debt. They should now expect to have unfair employment conditions imposed on them at any time on the Secretary of State’s whim without proper negotiation or consultation. The Government may think that bringing in immigrant workers will plug the desperate skills shortage in the health service, but they are closing the door to prevent those desperately needed workers from coming into the country. The Government then wonder why people do not have any confidence in them to run the health service or any other public service.

Even before these changes began to bite—figures were cited earlier, but these are the most up-to-date ones I was able to find—the average student loan debt for a new graduate in England was £24,540. In Scotland, it was just a shade over £10,500. That is the difference that can be made to a new graduate’s starting position if we have a Government who believe in investing in higher education and supporting students at a time when they should be concentrating on their studies, not worrying about their bank balance.

I cited those figures to demonstrate that the Government’s claim that they cannot afford a fairer system of student support is nonsense. It is perfectly affordable if they make it a priority. The Scottish Government think it is important and are prepared to make difficult decisions elsewhere to invest in education, not simply because of the benefits to the people who are educated, but because of the immense and immeasurable benefits that those people bring to our society by working in our health service, our schools, our public services and our private industries to boost the economy and generate wealth that we can all share in.

At 10 o’clock tonight, almost everybody in this Parliament who says that we cannot afford to treat our students fairly—not many of them are represented here—will vote to spend £200 thousand million on something whose only possible purpose is to commit a crime on an unimaginable scale. That is where our priorities are just now. If anybody watching this debate thinks it has been one-sided—I have done a rough calculation, and about 85% of people have spoken against what the Government have done—that is how one-sided the Government’s consultation was: 84% were against the Government. It is no surprise that the Minister is here on his own, and that none of his pals want to speak in defence of the policy. A couple have come along, but none wanted to speak. The imbalance in this debate is an indication of the depth of feeling across society as a whole against what the Government have done. It is not too late for the Government to change, and I hope they will do so very quickly.

Before I call the Minister, as colleagues will know, changes made in this Parliament to the Standing Orders allow the mover of a motion to speak for two or three minutes after the Minister has sat down. Helen Jones, would you like to do that?

You would. I call the Minister.

Thank you for your excellent chairing of this debate, Mr Pritchard. It is a pleasure to serve under your leadership. I am glad to have been reappointed in time to take part in this important debate and discuss the matter with the shadow Secretary of State for Education, the hon. Member for Ashton-under-Lyne (Angela Rayner).

I recognise the sincerity and strength of feeling about this question among hon. Members and members of the taskforce that advised the previous Government, but I am sure they understand that my challenge as a Minister in the Department responsible for student and university finance is to ensure that our higher education system remains open to all and that our universities remain well funded. The hon. Member for Warrington North (Helen Jones), who made an excellent opening speech, and other hon. Members have asked several important questions, which I will attempt to answer. However, I will first provide some strategic context to the decisions that the Government took in 2015.

When we reformed student finance in 2011, we put in place a progressive student loans system. Higher education is therefore accessible to all who have the potential to benefit from it, irrespective of their ability to pay. The system is working well and this Government have done more than any other to put higher education financing on a secure and sustainable footing. England has some of the finest universities in the world, and it is vital for our future economic prospects that they remain well funded. Total funding for the sector increased from £22 billion in 2009-10 to £28 billion in 2014-15, and it is forecast to reach £31 billion by 2017-18. We must ensure that our universities have the resources they need and every student has a high-quality experience during their time in higher education.

As the hon. Member for Southport (John Pugh) acknowledged, the warnings in the last Parliament that there would be a deterrent effect on student applications proved wrong. Students from disadvantaged backgrounds are now going to university at a record rate—up from 13.6% in 2009 to around 18.5% in 2015. People from disadvantaged backgrounds are now 36% more likely to go to university than they were under the previous Labour Government.

Can the Minister enlighten us about the position with the Russell Group universities?

It is important that we make progress across our system. In the guidance that I sent to Les Ebdon, the director of fair access, in February this year—by the way, that was the first guidance that he had had in more than five years—I explicitly gave him strong political support to ensure that all institutions, including those that see themselves as the elite institutions in this country, do the heavy lifting on access and that people who have the capacity to benefit from education at Russell Group institutions get the chance to.

In Scotland, as the hon. Member for Glenrothes (Peter Grant) may be aware, controls on student numbers continue to stifle aspiration and opportunity in a way that is simply no longer the case in England because of the way that we have put our student finance system on a sustainable footing. He made several points in this respect. I steer him towards a recent statement by the Sutton Trust that

“Scottish 18 year olds from the most advantaged areas are still more than four times more likely to go straight to university than those from the least advantaged areas.”

By contrast, the figure in England is 2.4 times. I also point him to a statement by Audit Scotland, which says:

“It has become more difficult in recent years for Scottish students to gain a place at a Scottish university as applications have increased more than the number of offers made by universities.”

I do not know whether the Minister is aware that the Scottish Government have committed themselves to ensuring that 20% of students in Scotland come from the 20% most deprived backgrounds by 2030. In other words, the Scottish Government have committed to doing away with that imbalance completely by 2030. May we be told what the UK Government’s equivalent commitment is?

Certainly. We, too, are committed to increasing the proportion of students from disadvantaged backgrounds who go to university. As I said a moment or two ago, we in fact intend to double that proportion by the end of this Parliament compared with the level that we inherited from the previous Labour Government in 2009-10, taking the proportion from 13.6% to 27.2%. We also want the number of students from BME backgrounds who go to university to increase significantly, by 20%.

Yes. As I said, we have written to Les Ebdon to give him guidance for his dealings with all universities. That guidance gives him strong political cover to ensure that all institutions do the heavy lifting that he requires of them as he negotiates access agreements. Through the Higher Education and Research Bill, which hon. Members have mentioned, we will strengthen his powers further, so he can start to look beyond the point of access to universities and at the whole student lifecycle. Widening participation is about much more than simply whether disadvantaged people get to university; it is also about how well they attain when they are there and how successfully they move on from higher education into employment or further study.

Will the Minister assure us that encouraging all places of further education to widen access will not undermine meritocracy? Will he also take to the newly expanded Department for Education the fact that education, from the early years up to university, is crucial in improving the life chances of those at the bottom of the scale?

Yes, I assure my hon. Friend that universities are autonomous in setting their admissions policies. The access agreements—in future, those will be access and participation agreements—that they come to with Les Ebdon are not targets imposed by the Government but are voluntarily agreed by the universities with the director of fair access. That will remain the case. The autonomy of our great universities is key to underpinning their success and will remain a strong feature of our system.

To return to a point that was raised a moment ago, does the Minister agree that it is somewhat rich for our colleague the Scottish National party spokesman, the hon. Member for Glenrothes, (Peter Grant), to talk about the Scottish system when English taxpayers are subsidising education in Scotland under the Barnett formula? As the Minister and his Department perhaps know, we also could have no tuition fees in this country if we had the same generous per-head allocation from central Government as Scotland does.

Higher education has been a devolved issue since 1999, and it is up to the devolved Administrations to determine how they spend their resources. In England, we have chosen to put our higher education on a sustainable footing, which has meant that proportionately more people can go to universities in this country than ever before. We want that to continue.

[Sir David Amess in the Chair]

Many hon. Members raised the threshold freeze and retrospection. The e-petition that we are discussing was started by Mr Alex True, who is a recent graduate, because he was concerned by the Government’s decision, which we announced in November 2015, to freeze the repayment threshold at £21,000 until April 2021. This is an important matter and a proper subject for debate, and I welcome the opportunity to explain why the Government took that decision and its impact.

We considered freezing the threshold because we needed to ensure that higher education funding remained sustainable. The choice was either to ask graduates who benefit from university to meet more of the costs of their studies or to ask taxpayers to contribute more. We undertook a full consultation on the change, as Members have mentioned. The consultation was open for 12 weeks, until 14 October 2015, and we then undertook a full assessment of the equalities impact, in line with our obligations. The responses to the consultation, which I accept were often against the proposal, were analysed exceptionally carefully. On balance, the Government decided that it was fairer to ask graduates for a greater contribution to the costs of their study rather than to ask taxpayers to do so. The reasons for that are clear. Graduates benefit hugely from higher education. On average, graduate earnings are much higher than those of non-graduates. In 2015, graduates’ salaries averaged £31,500, compared with £22,000 for non-graduates. The threshold is still higher in real terms than the one we inherited from the Labour Government.

A good attempt from the Minister, but does he not accept that he is missing the point? It is not a question of comparing the threshold he inherited; it is about the commitment made to students when they entered into their university degrees. Does he not accept the argument that it is a fraudulent practice to enter into an agreement on one set of terms, only for the Government then to change those terms completely? Would he accept that in relation to the purchase of a product he was making?

Hon. Members made much the same point on many occasions throughout the debate, and I will come on to those arguments shortly.

May I sympathise with the points made by the hon. Member for Sheffield Central (Paul Blomfield)? It is not just those on the Opposition Benches; those students affected have a lot of sympathy, certainly from me and, I hope, many of my colleagues, on the Government Benches, when it comes to the retrospective nature of these changes. As the Minister knows, I have had a heavy postbag from students for whom the goalposts have been changed and who are effectively due to pay a much higher interest rate than they could realistically have anticipated. I do not think that is right. We have heard eloquent speeches about the other challenges facing the younger members of society today. This is one area where we could help them out.

I look forward to explaining shortly to my hon. Friend exactly why we took the decision and the reasons why we believe it was the right way forward to put our system on a sustainable footing and ensure more opportunities for young people to gain from all the advantages that higher education can bring them.

For loans taken out before 2012, graduates started repaying when their income reached £15,000. That threshold has now risen to £17,495. The Government set the repayment threshold at £21,000 for post-2012 borrowers, proposing that that would be uprated annually in line with earnings from 2016, when the first graduates under the new system would start repayments. When the policy was introduced, the threshold of £21,000 was about 75% of expected average earnings in 2016. Updated calculations, based on earnings figures from the Office for National Statistics, show that figure is now 83%, reflecting weaker than expected earnings growth over the intervening period. The proportion of borrowers liable to repay when the £21,000 threshold took effect in April is therefore significantly lower than could have been envisaged when the policy was originally introduced. The threshold would now be set at around £19,000 if it were to reflect the same ratio of average earnings.

I also wish to stress that the impact of the freeze is relatively modest—albeit, I accept, still unwelcome for graduates. Borrowers earning over £21,000 will repay about £6 a week more than if we had increased the threshold in line with average earnings. Of course, those graduates earning less than £21,000 will not be affected at all.

Is the Minister not confirming what I said earlier? I hope he will address that specifically, but the problem is that when the Government introduced the new system, they got the resource accounting and budgeting charge wrong. The consequence is an additional cost on the Exchequer, and instead of taking responsibility for that, the Government have transferred that responsibility on to students.

Modelling the RAB charge is not an easy process, but the figures that the hon. Gentleman referred to earlier were simply not correct. We never modelled the RAB charge at over 50%. We expect about 20% to 25% of the loan book not to be repaid, and that is a deliberate, conscious investment by the Government in the skills base of the country. It is a progressive policy that enables people to go into careers that may not necessarily allow them to repay the full amount, and the Government do that knowingly and willingly.

I reject the characterisation of our labour market as a failure. Clearly, when we look at the unemployment figures today, we cannot but be struck by the extent to which we have succeeded in getting many thousands more young people into work. The latest unemployment data from the ONS show 23.1 million people working full time, which is 300,000 more than even a year ago, let alone than in 2010. The percentage of young people out of work is now at a record low altogether.

While the Minister is quoting employment figures, will he tell us how many of those jobs are high-paid graduate jobs?

Graduates from our universities do spectacularly well on the whole in moving into graduate employment. Obviously, we want variability across the system to even out and we want to ensure less patchiness in the system, but graduates do go into graduate employment on the whole.

The funding system put into place is also progressive. Interest rates after graduation increase with income, so that high earners repay more. For those earning £21,000 or less, the interest rate is set at RPI flat: the loan balance does not increase in real terms. For borrowers who earn more than that, the interest rate increases to a maximum of RPI plus 3%. It is only fair that borrowers who have benefited most from their education should repay the most back into the system.

Student loans are very different from a mortgage or credit card debt. Repayments are determined by income, not the amount borrowed. Borrowers are protected. If at any point their income drops, so do their repayments. Borrowers will repay only if they earn above the threshold and the loans are cancelled after 30 years, so many borrowers, as I said, will not repay the full amount. That is part of the taxpayers’ investment in our country’s skills base.

I recognise hon. Members’ concerns that students may not be fully aware of the terms and conditions of their loans at the time of application. The Student Loans Company does, however, provide students with a clear statement of the terms before the student completes their application for a loan. On page 3 of “Student loans—a guide to terms and conditions”, it states clearly—this is not hidden in some small footprint—that

“The regulations may change from time to time and this means the terms of your loan may also change. This guide will be updated to reflect any changes and it’s your responsibility to ensure you have the most up-to-date version.”

Furthermore, it is worth noting that the threshold freeze did not actually change the terms and conditions; it merely left them unchanged.

That information includes the way that interest will be applied and the repayment terms that will apply. Students are asked explicitly to confirm that they understand the information before they are granted the loan. All the information that the SLC provides to students is reviewed regularly to ensure that it is both accurate and accessible.

I have lost count of the number of times that iTunes has changed its terms and conditions, and I check the box and agree every time—more fool me, some might say. However, when the substance of the repayment conditions is written up in large print to entice students in but is open to change through the small print, surely that is not right. Even if the Government and the Student Loans Company took even greater steps to tell potential students that the terms and conditions could change, that is hardly a reassuring message to send to them, is it?

There are always ways in which the Government can try to make things more explicit, but we cannot deny that on page 3 of the guide to terms and conditions students were clearly informed of the possibility that terms might change. In the event, they did not change—they were left unchanged, as I said.

Let me turn to the benefits of the freeze to the system and all the other reasons we felt it important to do what we did. A sustainable student finance system enabled us to abolish student number controls, lifting the cap on aspiration and enabling more people to receive the benefits of a university education. That is essential if we are to maintain our place as a country with a modern, highly skilled economy. Freezing the threshold means that we expect to recover £3.2 billion more of the loan outlay from existing borrowers. From future borrowers, we expect an additional £1 billion of repayments per £15 billion of loan outlay.

We send proportionately fewer people to university to study at undergraduate level than our main competitors. Between now and 2022, more than half of job vacancies will be in occupations most likely to employ graduates. If we are to continue to grow our economy, we must equip our young people with the skills and qualifications they need to fill those roles. England is not unique in grappling with those problems, but we are one of the few countries to have found a sustainable solution. That has been recognised internationally; the OECD has praised the student loan system in England as that of

“one of the few countries to have figured out a sustainable approach to higher education finance”.

I recognise the strength of feeling there is on the issue, but the Government must balance the interests of students, who benefit from higher education, with those of general taxpayers. We have taken difficult decisions, but in the process we have underpinned the financial sustainability of our student funding system in a manner that means we can lift student number controls and enable proportionately more young people than ever before to benefit from university.

I had hoped for a more encouraging reply from the Minister, because he is generally a decent soul, but his reply showed that he just does not get it. We have heard about the impact on poorer students, on women and on those from ethnic minorities. Most of all, we have heard about the impact on trust in politics and the Government. The Minister has told us that the Government have not changed the terms and conditions, and that is absolutely true; but the Government have gone back on what they told students. He says we want a system that is open for all, but at the moment our most prestigious universities are open to all in the same way that the Ritz hotel is. He has not tackled that. He will not give us the figures for poorer students going to the most prestigious universities. He has admitted that the Government got themselves into trouble on this issue, because average earnings did not rise as much as they hoped they would. In other words, their economic policy is at fault.

As for the system being sustainable, all the evidence shows that it is in real trouble. It is not going to be sustainable in the long term or deliver what students want, or what the country wants, which is an opportunity for every young person, wherever they come from, to go to the university that is right for them—not the cheapest or the nearest—and for universities to admit them. Despite the talk of meritocracy, we do not have a meritocracy—unless we believe that those who are better off are automatically cleverer than other people; because in our system at the moment, people are less likely to go to a prestigious university if they are poor. I hoped that the Minister would be able to respond to those concerns today. Sadly, he has not. Students and their parents will note that.

Question put and agreed to.

Resolved,

That this House has considered e-petition 131167 relating to changes to the student loans agreement.